2023 (1) TMI 693 - AT - Central Excise

Denial of refund claim - failure to produce proof of refund to the individual taxi owners - denial of refund on the ground that in respect of these claims appellant had failed to establish that the amount were refunded actually to individual taxi owners - applicability of N/N. 5/98-CE - HELD THAT - On verification of documents as reflected in the remarks column above and having satisfied ourselves that the mismatches as stated are very minor in nature. Further it is also noted that there are errors in recording the engine number in the show cause notice whereby same engine number appeared twice in the show cause notice which is practically impossible. The verification as undertaken in these cases cannot be reason for denial and the verification has to be caused by referring to all other details. Having satisfied with correctness of these claims, it is held that demand made in respect of these claims needs to be set aside. It is settled law that the refund orders made in terms of the Section 11B of the Central Excise Act, 1944 are judicially determined, the same needs to be set aside in the manner as provided in law. Having not filed any appeal against the said refund orders those order had acquired finality and could not have been challenged by way of the proceedings initiated under Section 11A. In the case of M/S. EVEREADY INDUSTRIES INDIA LTD. VERSUS THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, THE ASSISTANT COMMISSIONER OF CENTRAL EXCISE, THE COMMISSIONER OF CENTRAL EXCISE 2016 (4) TMI 688 - MADRAS HIGH COURT Hon'ble Madras High Court has held that Once an application for refund is allowed under Section 11B, the expression 'erroneous refund' appearing in sub-section (1) of Section 11A cannot be applied. If an order of refund is passed after adjudication, the amount refunded will not fall under the category of erroneous refund so as to enable the order of refund to be revoked under Section 11A(1). One authority cannot be allowed to say in a collateral proceeding that what was done by another authority was an erroneous thing. In case of M/S. HONDA SIEL POWER PRODUCTS VERSUS UNION OF INDIA THROUGH SECY. AND ANOTHER 2019 (12) TMI 803 - ALLAHABAD HIGH COURT , Hon'ble Allahabad High Court has observed that once the adjudication has taken place under Section 11B cannot proceed to recover on the basis of erroneous refund under Section 11A so as to enable the refund order to be revoked, as the remedy lied under Section 35E for applying to the Appellate Tribunal for determination and not invoking Section 11A. Thus, the Show cause Notice issued to the appellant itself would be hit by the opinion expressed by the Hon'ble High Courts in the above referred decisions - the penalties imposed on the dealers of the appellant, i.e. appellant number 2, 3 and 4 are set aside - appeal allowed.

Issues Involved:
1. Erroneous refund of Central Excise duty.
2. Eligibility for refund claims.
3. Imposition of penalties under Central Excise Act and Rules.
4. Verification of refund to individual taxi owners.
5. Adjudication and finality of refund orders.
6. Legal principles regarding review and appeal of refund orders.

Detailed Analysis:

1. Erroneous Refund of Central Excise Duty:
The Commissioner confirmed a demand of Rs. 20,88,391/- erroneously refunded to the appellant under Section 11A of the Central Excise Act, 1944. The appellant had claimed refunds on motor cars converted into taxis, but investigations revealed that the amounts were not passed on to the taxi owners. The Tribunal noted that the refund claims were sanctioned by jurisdictional authorities and not reviewed by revenue authorities, making the show cause notice for recovery under Section 11A invalid as per the Madras High Court ruling in Eveready Industries India Ltd.

2. Eligibility for Refund Claims:
The appellant claimed refunds under Notification No. 4/97-CE and 5/98-CE. The Tribunal previously held that under Notification 5/98-CE, the manufacturer only needed to refund the excess amount to the buyer (dealer), not the individual taxi owners. However, for Notification 4/97-CE, the refund had to be passed to the taxi owners. The Commissioner's approach to deny refunds under Notification 5/98-CE for not proving refunds to individual taxi owners was incorrect as per the Tribunal's earlier orders.

3. Imposition of Penalties:
Penalties were imposed on the appellant and various dealers under Section 11AC of the Central Excise Act and Rule 209A of the Central Excise Rules. The Tribunal found that the penalties on the dealers were unjustified as they were not responsible for the fraudulent claims. The penalties on the appellant were also set aside as the orders sanctioning the refunds were not challenged through proper appellate channels.

4. Verification of Refund to Individual Taxi Owners:
The Tribunal remanded the matter for verification of evidence regarding payments to taxi owners. The Commissioner verified the documents and found discrepancies, confirming a demand of Rs. 20,88,391/-. The Tribunal, upon sample verification, found the discrepancies minor and the documents satisfactory, setting aside the demand except for Rs. 80,169.75 related to Notification 4/97-CE claims.

5. Adjudication and Finality of Refund Orders:
The Tribunal emphasized that refund orders under Section 11B are judicially determined and can only be set aside through appeals, not through Section 11A proceedings. The lack of appeal against the refund orders meant they had attained finality, and the show cause notice for recovery was invalid.

6. Legal Principles Regarding Review and Appeal of Refund Orders:
The Tribunal cited the rulings of the Madras High Court in Eveready Industries India Ltd. and the Allahabad High Court in Honda Siel Power Products, which held that once a refund order is adjudicated under Section 11B, it cannot be challenged under Section 11A without following the proper appellate procedures. The Tribunal concluded that the show cause notice and subsequent order were invalid, and the penalties imposed were unjustified.

Conclusion:
The Tribunal allowed the appeals, setting aside the demands and penalties, except for Rs. 80,169.75 related to claims under Notification 4/97-CE. The Tribunal reiterated the need for proper appellate procedures to challenge refund orders and emphasized the finality of adjudicated refund claims.

← Previous Next →